GST revenue performance: Gainers and losers after seven years
- Economic & Political Weekly
- 37(14), 14 Sep, 2024: p.35-49
This article examines seven years of Goods and Services Tax (GST) revenue performance in India. Findings reveal that overall revenues have only recently converged to pre-GST levels, with the union government foregoing up to 1% of GDP in GST revenues annually during this period. The GST has broadly functioned as expected, benefiting poorer states through redistribution. Looking ahead, folding the cess into the regular rate structure could eliminate the need for revenue guarantees to states. The experience of revenue guarantees offers important lessons for fiscal policy design, highlighting both the challenges and opportunities of implementing large-scale tax reforms in a diverse federal system. This article examines in detail seven years of goods and services tax revenue performance. Our main findings are as follows. First, overall revenues have only now converged to pre-GST levels. Second, the union forewent up to 1% of gross domestic product in GST revenues for each of the seven years. Third, the GST has worked broadly as expected to benefit the poorer states. Fourth, going forward, folding the cess into the regular rate structure can ensure that revenue guarantees for the states may not be necessary. Finally, the revenue guarantee experience holds important lessons.- Reproduced
Economics, Goods and Services Tax, GST Revenues, Public Finance, Fiscal Policy, Revenue Guarantees, Union Government, State Finances, GDP Impact, Cess Structure, Tax Reform, India